• Fitch downgrades BP Plc to AA from AA+, placed on watch negative
  • UK Nationwide May house prices +0.5% m/m, +9.8% y/y, stronger than median forecasts of +0.3%, +9.6% respectively
  • ECB’s Bini Smaghi: Perhaps too much concern over exchange rate in Europe
  • Euro zone May final services PMI revised up to 56.2 from 56.0 flash, highest since August 2007
  • UK May services PMI 55.4 compared to 55.3 in April and median forecast of 55.5
  • Euro zone April retail sales -1.2% m/m, -1.5% y/y, much weaker than median forecasts of +0.1%, -0.2% respectively. But upward revisions to March data, t0 +0.5% m/m from flat and to +1.3% y/y from -0.1% helped soften blow a little

All started off sooooo well, European stocks on a tear, oil prices rising smartly. Then a double whammy of much worse than expected euro zone retail sales data and Fitch downgrading BP deflated things somewhat.

EUR/USD down at 1.2255 from early 1.2295 having been as high 1.2326. There was much talk of decent-sized sell orders up at 1.2320/30 and so it proved. The euro bulls tried on at least three occassions to take out the interest, but to no avail. Middle Eastern names seen good sellers around the highs and BIS seen selling around 1.2315 area, which hardly helped.

Most of the session was confined to very narrow range trading around 1.2300 before the double whammy mentioned above swung things in favour of the euro bears.

USD/JPY up at 92.65 from early 92.20 with yen still generally weak, political uncertainty and generally better risk sentiment underminning. UK clearer and US names notable buyers of USD/JPY this morning, but Japanese corporate sell orders layered from 92.50 up to 93.15 have ensured gains above former level have been slow in coming.

Cable little changed at 1.4685. Early rally above 1.4700 ran into decent selling interest from Middle Eastern names and Asian sovereign.